Craft spirits gaining market share

The number of small distilleries in America grew from around 500 to over 2,000 in just six years. Over the same six years the largest distilleries lost 2.3% points of market share. These government-reported data confirm the quick emergence of craft spirits, who are following in the footsteps of craft brewers.

Craft spirits first took off in California, Colorado and Texas but growth has spread across the US. There now 118 distilled spirits producers (DSP) permit holders across New England and another 163 in New York. Almost all of them are small and started within the last 10 years.

Consumers are noticing and asking for craft spirits, and liquors stores and restaurants are responding. More liquor stores are allocating shelf space to craft spirits, just as they starting doing for craft beers in the 1990s. “I recognize and appreciate the quality and passion that these products represent,” says Larry Venezia, General Manager at Giles Wine and Spirits in Woburn, MA, “and looking forward I feel that this will be an important segment of our business.”

Over 2,000 Craft Spirits Producers

The number of small distilleries grew 265% from 2010 to 2016 to a total of 2050. Growth slowed 2016, but that was after 27% growth in 2015, 29% growth in 2014, and 35% growth in 2013. The 2016 data include 113 producers who sold 10,000 to 100,000 proof gallons, 1,628 producers who sold under 10,000 proof gallons, and 309 producers who are just getting started and/or still aging spirits and haven’t reported any sales.

Taking Market Share from Large Brands

Forage in Cambridge, MA, is a farm-to-table restaurant that puts a modern twist on classic dishes with a focus on local ingredients. “Our guests appreciate food that comes from their surrounding community and now we can do the same behind the bar,” says Joe Choiniere, Bar Manager. “It definitely adds to the experience when we can introduce guests to a unique, delicious local gin or whiskey.”

Craft spirits producers grew their market share from just 0.5% of volume in 2010 to 1.5% of volume in 2016. With craft spirits mostly on the premium to super premium end of the spectrum, their share of total sales revenues will be even higher.

The largest producers saw their market share move in the opposite directly, falling from 98.5% of the market volume to 96.2%. The balance of the volume went to medium sized producers who sell between 100,000 and 750,000 proof gallons a year.

Methodology

The alcohol business is highly regulated and taxed in most countries, and the regulator in the US is the Alcohol and Tobacco Tax and Trade Bureau (TTB). Every distillery, no matter how small, must have a license from the TTB. Every distillery, no matter how small, is required to file regular reports and pay federal excise taxes.

The TTB publishes some of these data and they provide insights into the American spirits business. One is the TTB’s reports on taxable removals by beverage spirits producers, which includes the number proof gallons that producers and bottlers removed from their plant for sale or export. The same TTB report also breaks the totals down by size of the producer and includes the total number of producers.